The news on VeraSun Energy Corporation has been flying fast and furious. Just yesterday, the financially-troubled ethanol producer announced that it had received a non-binding unsolicited indication of interest to purchase substantially all of its assets. The identity of the third party was not disclosed, but some speculate that it could be Poet, LLC.
The VeraSun announcement came just hours after Jeff Broin, CEO, Poet, LLC, Sioux Falls, SD, told the Associated Press that the company was in talks with a number of ethanol producers. But, Broin did not disclose the names of companies with which his company is talking.
Most likely any buyout of VeraSun would be welcome news to farmers concerned about having their corn contracts honored.
VeraSun Corn Suppliers to meet tomorrow
In fact, a large group of farmers (now more than 100) filed an objection last Friday to VeraSun’s motion in a Delaware bankruptcy court to be allowed to void corn contracts with as little as 10 days notice.
The group of farmers, known as the VeraSun Corn Suppliers, plan to meet tomorrow at 9:00 am at the Floyd Community Center in Floyd, Iowa. At this time, other farmers and grain elevators with contracts for the delivery of corn to any of VeraSun’s 14 operating ethanol plants will have the opportunity to join the group.
The cost to join the group is $300. For more information, contact Mark Kuhn at 641-228-2566, a farmer who also is a representative with the Iowa Legislature.
Minnesota State Representative Tony Cornish said that some farmers could lose their business if VeraSun cancels their contracts. “There’s anger and frustration,” says Cornish of his constituents, including farmers, grain elevators and rural lenders. Few people realized how a Chapter 11 filing could affect contracts yet to be executed, he says.
Cornish added that rejected contracts could not only affect farmers and grain elevators, but implement dealers as well. Farmers may have taken out loans for new equipment, expecting they would be paid from VeraSun. Now that is in question, he says.
Chip Mack, Whitewater Creek Grain & Feed, Waterville, MN, noted that he has contracts with farmers based on forward contract prices that he was going to receive from VeraSun. He and other grain elevators in the same situation will have to honor the contracts because they are not bankrupt. Many of the contracts were for $5-7 per bushel when corn prices were up to record levels this spring. Corn now has dipped below $3.50 per bushel.
“VeraSun could have hedged grain or sold ethanol, but chose to do neither. This was their poor management decision. People in good faith agreed on contracts,” Mack says, adding that the recent VeraSun action to void contracts calls into validity the concept of cash contracts.